The Gigantic Eurozone Ponzi Scheme

Not everyone agrees with Christopher Caldwell's assessment of the European Union as "the institutional expression of the Americanization of Europe" according to his 2009 book, Reflections on the Revolution in Europe, or, as it is sometimes referred to, "the United States of Europe." Former Soviet dissident Vladimir Bukovsky, for example, points out that the EU institutions have much more in common with the former Soviet Union, and prefers to call the EU the "EUSSR."

Bukovsky also calls the EU a "shotgun marriage:" it forces its projects upon people against their democratic will. When, for example, the voters of Denmark in a 1992 referendum rejected the Maastricht Treaty, which transferred a huge chunk of national sovereignty to the European level, they were forced to vote again in 1993.

The same happened to the Irish when, in a 2001 referendum, they rejected the Nice Treaty to transfer an additional chunk of national sovereignty to the European level: they were forced to vote again, and voted in favor of it the following year.

The coercion occurred again in 2005, when France and the Netherlands, also in referendums, voted against the European Constitution. The EU establishment would not take "No" for an answer. Its members simply rewrote the rejected document under a different name, resurfacing it in 2007 as the "Treaty of Lisbon," which transferred another chunk of national sovereignty to the EU – but this time no referendums were allowed, except in Ireland, where, in 2008, the Lisbon Treaty was still rejected. The following year, the Irish were forced to vote again. This time, they voted in line with EU demands and they were not called to the vote again. "It is a trick for idiots," says Bukovksy. "The people have to vote until the people vote the way that is wanted."

Last week, we saw yet another example of this pattern. The Slovak Parliament had rejected granting additional powers to the EFSF, the EU's bailout fund, but within a week, it had to vote again. This time, it approved the EU proposal. Now, the Slovaks are stuck with it forever.

The EU is like Islam: one is allowed in, but once one is in, one is never allowed out again. No wonder that all over Europe people who care for their own national identity and independence have come to loathe the EU and its unaccountable bureaucracy in Brussels, which writes pieces of legislation -– so-called "directives" -– that all the national parliaments of the member states are obliged to incorporate into their national legislations.

And so, recently, another pattern has evolved: While in national elections, people used to vote primarily on the basis of domestic issues, they have begun to vote anti-EU.

Since the crisis surrounding the euro, the common currency of most of the EU member states, began, the EU has become electorally toxic for Europe's politicians.

In the Netherlands and Finland, the support for parties which oppose the euro and the EU in general is growing. In Ireland and Portugal, pro-European governments have been trashed in the elections. German Chancellor Angela Merkel has so far lost seven consecutive regional elections. The latest victim of this trend was Slovak Prime Minister Iveta Radicova. She managed to get the EFSF bill through Parliament, but as a result her government fell. The Spanish government is expected to lose next month's general elections. The chances of re-election next year of France's President Nicolas Sarkozy looks slim.

Saving the euro has become a political suicide mission for Europe's politicos. It does not matter whether politicians belong to the left or the right: the Spanish government of Prime Minister Zapatero is a left-wing government; the governments of Radicova, Merkel and Sarkozy are right-wing. In the Netherlands both the right-wing Freedom Party and the left-wing Socialist Party are doing well in the polls because of their EU opposition, while both the center-right and center-left parties are losing support.

The problem for the governing parties of the Left and the Right is that although they feel they have no other choice but to support hugely unpopular measures to save the euro by transferring more national powers to the EU, they fear that a collapse of the euro might lead to the collapse of the economy of all the countries in the eurozone and of the entire European banking system. There is, as Bukovsky said, no way out.

The question, however, is how long the politicians will be able to continue their costly rescue operations. Experts say that at least €1 trillion is needed to save the euro from economic calamity, as the EU leads political parties toward electoral disaster from taxpayers who are unwilling to pay the debts made by other nations.

One likely, albeit inflationary, solution out of the political quagmire might be that the European Central Bank (ECB) starts printing money to finance the interventions on the bond markets necessary for Greece, Portugal, Spain, Italy and other euro countries whose sovereign debts are so huge that they can no longer borrow money on the capital markets.

Or the EU might come up with bogus solutions, such as last week's proposal of EU Commission President, José Manuel Barroso, to turn national debts into supra-national debts so that they appear to cost nothing to the national states -- but Barroso conveniently forgets that it is the national states who must guarantee the debts of supra-national organizations such as the ECB and the EFSF.

To save its insolvent members, the EU is forcing all eurozone states to vow to bail them out –- with the result that they all risk becoming insolvent. The markets are well aware of the risks. After the eurozone countries promised an additional €109 billion to Greece at their summit meeting of 21 July, the price of credit default swaps (CDS), insuring against German government bonds, went up substantially compared to those of the United Kingdom. The CDS premium for German five year government bonds is today three times as high as in October 2010 and higher than it was during the Lehman Brothers collapse crisis f 2008-2009. The premium for similar British bonds has less than doubled and is only half of what it was at the height of the Lehman crisis. The difference between Germany and the UK is that Britain held onto the pound while Germany signed away the mark. Like Germany, Britain is an EU member state; unlike Germany, it never renounced national sovereignty over its own currency.

The EU is currently trying to save its Ponzi scheme from failure by expanding it. However, the bigger the bubble becomes, the larger the catastrophe will inevitably be when it finally bursts. But perhaps, both Sarkozy and Merkel reckon, this will only happen after the next French presidential elections in 2012 and the next German general elections in 2013.

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